The Banker’s Ranking of the Top 100 International Bank
An Overview of the World’s Largest Banks
By Hugh Thomas
I am grateful to James Ma Kwok Wai for able assistance in constructing the tables used in this paper. This is a first draft. Please contact the author at hugh-thomas@cuhk.edu.hk with corrections, comments and suggestions for improvement.
Banks provides the world with liquidity – the ability to exchange ownership claims with minimal cost. When we lend money to non-financial corporations, we are conscious of lending. But when depositors lend money to banks, they believe that they have “money in the bank”. Banks debts are defined as society’s money – the most liquid asset most members of society can hold. To make payments using bank deposits, customers must access the payments system through banks.
Banking is defined in law and regulated by the national governments of the world. Most jurisdictions define banks as those institutions that take deposits and make payments on behalf of customers through payments systems. In some jurisdictions, banks are also defined by their lending power.
In addition to providing legally defined banking services, banks lend, manage financial assets, and make and service markets. They provide trust and investment banking services – underwriting, issuing, and making markets in securities and advising companies as to how they should tap and invest in the money and capital markets. Some banks also underwrite and distribute life and general risk insurance. In playing these diverse roles, banks are regulated by banking, securities markets, insurance and pension fund regulators. The critical nature of banking services and the high degree of government regulation leads customers to believe that the obligations of banks – especially the largest banks – are implicitly (if not explicitly) guaranteed by governments. This assumption, in turn, feeds the need for regulation.
Banks’ liquidity, market making, market servicing, information processing and other intermediation services evidence large economies of scale. The importance of reputation in provision of these services and the implicit government guarantees of the largest banks increases further their scale economies. Thus it is not surprising that concentration in banking worldwide is very high. In most countries, a handful of very large banks dominate.
Table 1 shows the ranking of the 100 largest banks by book value of equity capital. These 100 banks include over 67 percent of the world’s banking assets [measured by the assets of the world’s largest 1000 banks]. Within the top 100 banks, there is also substantial concentration, with the top 20 banks accounting for 50 percent of profit and 45 percent of the aggregate assets and capital. Bank concentration is likely to increase in future as national boundaries to the flow of capital decrease and nationally fragmented institutions, markets and instruments succumb to globalization.
Table 1: The 100 Largest Banks in the World by the Book Value of Equity Capital
|Rank |
| |
| |US$ billion |% | | | |
|Loan Loss Reserve / Gross Loans |1.9 |1.9 |1.8 |1.9 |3.1 |
|Impaired Loans / Gross Loans |1.5 |1.3 |2.4 |1.5 |4.0 |
| | | | | | |
|Basel Tier 1 Capital / Risk Assets |11.8 |8.7 |6.2 |8.9 |7.9 |
|Equity / Total Assets |2.3 |7.5 |3.6 |7.8 |5.3 |
|Profitability and Efficiency | | | | | |
|Return On Average Equity |21.3 |15.6 |14.4 |13.9 |8.5 |
|Expense Ratio |73.3 |65.4 |56.9 |53.9 |72.1 |
|Liquidity | | | | | |
|Net Loans / Deposits & Short-term Funding |22.7 |73.7 |57.7 |76.4 |68.4 |
Note: · Names of banks included in computing the territorial averages are included in appendix 2
· Definition of ratios are included in append 3
APPENDIX 1:DEFINITION OF ACCOUNTS
Liquid Assets
Cash and Due from Banks
Deposits with Banks
Due from Central Banks
Due from Other Banks
Due from Other Credit Institutions
Trading Securities
Government Securities
Other Bills
CDs
Treasury Bills
Other Assets
Listed Securities
Equity Investments
Investment Securities
Non-Listed Securities
Other Securities
Bonds
Other Investments
Deferred Tax Receivable
Other Non Earning Assets
Intangible Assets
Loans, Net
HP / Lease
Loans to Other Corporate
Loans to Group Companies / Associates
Mortgages
Loans to Municipalities / Government
Loans to Banks
Trust Account Lending
Other Loans
Overdue Loans
Restructured Loans
Other non-performing Loans
Loan Loss Reserves
Loan Loss Reserves (Previously Deducted)
Fixed Assets
Land and Buildings
Other Tangible Assets
Deposits & Short-term Funding
Deposits - Demand
Deposits - Savings
Banks Deposits
Municipalities / Government Deposits
Other Deposits
Certificates of Deposit
Debt Securities
Commercial Paper
Mortgage Bonds
Convertible Bonds
Other Negotiable Instruments
Other Securities
Other Bonds
Other Funding
Other Liabilities
Other Liabilities
Subordinated Debt
Other Non-equity Reserves
General Loan Loss Reserves
Total Equity
Hybrid Capital
Minority Interests
General Banking Risk
Preference Shares
Common Shares
Other Equity Reserves
Retained Earnings
Net Interest Revenue
Interest Received
Interest and dividends on debt securities
Interest received
Other dividend income
Interest Paid
Interest paid
Other Operating Income
Fees and commissions receivable
fees and commissions payable
Foreign exchange trading
Securities trading
Other / Derivatives trading
Sundry operating income
Investment securities gains
Other non-banking income
Overheads
Personnel Expenses
Amounts written off fixed asset investments
Other non-interest expenses
Depreciation
Provisions for contingencies and commitments
Loan Loss Provisions
Specific loan loss provision
General loan loss provision
Other
Income from associates
APPENDIX 2: NAME OF BANKS INCLUDED IN THE COMPUTATION OF REGIONAL AVERAGES
Name of Banks Included in the Computation of Regional Averages:
China
Bank of China
China Construction Bank
Industrial and Commmerical Bank of China
Agricultural Bank of China
Japan
Mitsubishi Tokyo Financial Group
Mizuho Financial Group
Sumitomo Mitsui Financial Group
UFJ Holdings
Norinchukin Bank
Resona Holdings
Sumitomo Trust & Banking
Shinkin Central Bank
Shoko Chukin Bank
Mitsui Trust Holdings
Rest of Asia
HSBC Holdings PLC
State Bank of India
Kookmin Bank
DBS Bank
Europe
Erste Bank
Fortis Bank
Dexia
KBC Bank
Danske Bank
Nykredit Group
Credit Agricole
BNP Paribas
Groupe Caisse d'Epargne
Societe Generale
Groupe Banques Populaires
Deutsche Bank AG
HypoVereinsbank
Commerzbank
Bayerische Landesbank
DZ Bank Deutsche Zentral-Genossenschaftsbank
Landesbank Baden-Wurttemberg
Dresdner Bank
HSH Nordbank
Eurohypo
Norddeutsche Landesbank Girozentrale
Allied Irish Banks
Bank of Ireland
Banca Intesa
UniCredito Italiano
SanPaolo IMI
Capitalia Gruppo Bancario
Banca Monte dei Paschi di Siena
BNL-Banca Nazionale del Lavoro
ABN AMRO Bank
Rabobank Group
ING Bank
DnB NOR Group
Santander Central Hispano
Banco Bilbao Vizcaya Argentaria
Caja de Ahorros y Pen. De Barcelona - la Caixa
Caja de Ahorros y Pen. De Barcelona - la Madrid
Banco Popular Espanol
Nordea Group
Svenska Handelsbanken
Skandinaviska Enskilda Banken
ForeningsSparbanken (Swedbank)
UBS
Credit Suisse Group
Royal Bank of Scotland
HBOS
Barclays Bank
Lloyds TSB Group
Standard Chartered
North America
Scotiabank
Royal Bank of Canada
Bank of Montreal
Toronto-Dominion Bank
Canadian Imperial Bank of Commerce
Citigroup
JP Morgan Chase & Co.
Bank of America Corp
Wells Fargo & Co.
Wachovia Corporation
Washington Mutual
U.S. Bancorp
MBNA Corp
Countrywide Financial Corporation
National City Corp
SunTrust Banks
Fifth Third Bancorp
Capital One Financial Corporation
Golden West Financial Group
KeyCorp
BB & T Corp
Bank of New York
Regions Financial Corp
PNC Financial Service Group
Desjardins Group
Australia
National Australia Bank
ANZ Banking Group
Commonwealth Bank Group
Westpac Banking Corporation
(Note: 4 of the top 100 institutions, including Credit Mutuel of France, Metlife and John Hancock of the U.S.A., Banco Itau Holding Financeira of Brazil, as listed in The Banker’s survey have been excluded in the computation due to unavailability of detailed information
APPENDIX 3: DEFINITIONS OF RATIOS
Asset Quality
Loan Loss Reserve / Gross Loans = [pic]
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Capital Adequacy
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Profitability and Efficiency
[pic]
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[pic]
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Liquidity
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[pic]
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[1] The Basel Accord definition of core equity capital for minimum regulatory capital requirements being the sum of common shareholders' equity common shares, contributed surplus, retained earnings, non-cumulative preferred shares plus minority interests in subsidiaries from Tier 1 capital minus goodwill.
[2] Bankscope is a comprehensive, global database containing financial information on 24,000 public and private banks from around the world. It combines data from the main information provider, Fitch Ratings, and 6 other sources, with software for searching and analysis.
[3] The 1988 Capital Accord, entitled “Basel Committee on Banking Supervision. International convergence of
capital measurement and capital standards” and subsequent amendments, is frequently referred to collectively as Basel I. In June 2004 the Basel committee released “International convergence of capital measurement and capital standards: a revised framework” informally called Basel II.
[4] Risk weighting calculates the amount of credit risk exposure the bank is deemed to face by Basel from a total position. The amount is calculated by weighting the value of each asset by its regulatory risk weighting. For example, under Basel I own-government obligations are risk weighted zero, interbank loans are risk-weighted 20 percent, retail mortgage loans are risk weighted 50 percent and other on balance sheet assets 100 percent. Off-balance sheet exposures are weighted to calculate a credit equivalent amount and then risk weighted.
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